Lex Fridman Podcast - #80 – Vitalik Buterin: Ethereum, Cryptocurrency, and the Future of Money

Episode Date: March 16, 2020

Vitalik Buterin is co-creator of Ethereum and ether, which is a cryptocurrency that is currently the second-largest digital currency after bitcoin. Ethereum has a lot of interesting technical ideas that are defining the future of blockchain technology, and Vitalik is one of the most brilliant people innovating this space today. Support this podcast by supporting the sponsors with a special code: - Get ExpressVPN at https://www.expressvpn.com/lexpod - Sign up to MasterClass at https://masterclass.com/lex EPISODE LINKS: Vitalik blog: https://vitalik.ca Ethereum whitepaper: http://bit.ly/3cVDTpj Casper FFG (paper): http://bit.ly/2U6j7dJ Quadratic funding (paper): http://bit.ly/3aUZ8Wd Bitcoin whitepaper: https://bitcoin.org/bitcoin.pdf Mastering Ethereum (book): https://amzn.to/2xEjWmE This conversation is part of the Artificial Intelligence podcast. If you would like to get more information about this podcast go to https://lexfridman.com/ai or connect with @lexfridman on Twitter, LinkedIn, Facebook, Medium, or YouTube where you can watch the video versions of these conversations. If you enjoy the podcast, please rate it 5 stars on Apple Podcasts, follow on Spotify, or support it on Patreon. Here's the outline of the episode. On some podcast players you should be able to click the timestamp to jump to that time. OUTLINE: 00:00 - Introduction 04:43 - Satoshi Nakamoto 08:40 - Anonymity 11:31 - Open source project leadership 13:04 - What is money? 30:02 - Blockchain and cryptocurrency basics 46:51 - Ethereum 59:23 - Proof of work 1:02:12 - Ethereum 2.0 1:13:09 - Beautiful ideas in Ethereum 1:16:59 - Future of cryptocurrency 1:22:06 - Cryptocurrency resources and people to follow 1:24:28 - Role of governments 1:27:27 - Meeting Putin 1:29:41 - Large number of cryptocurrencies 1:32:49 - Mortality

The following is a conversation with Vitalik Buterin, co-creator of an author of the White Paper that launched Ethereum and Ether, which is a cryptocurrency that is currently the second largest digital currency after Bitcoin. Ethereum has a lot of interesting technical ideas that are defining the future of blockchain technology, and Vitalik is one of the most brilliant people innovating in the space today. Unlike Satoshi Nakamoto, the unknown person or group that created Bitcoin, Vitalik is very well known and at a young age is thrust into the limelight as one of the main faces of the technology that may redefine the nature of money and all forms

of digital transactions in the 21st century. This is the Artificial Intelligence Podcast. If you enjoy it, subscribe on YouTube, review it with 5 stars and Apple podcasts, support it on Patreon, or simply connect with me on Twitter, Alex Friedman spelled F-R-I-D-M-A-N. As usual, I'll do one or two minutes of ads now and never any ads in the middle that can break the flow of the conversation. I hope that works for you and doesn't hurt the listening experience. Quick summary of the ads. Two sponsors. Masterclass and ExpressVPN. Please consider supporting the podcast by signing up to Masterclass at masterclass.com slash Lex. And getting ExpressVPN at expressvpn.com slash Lex pod. This show is sponsored by Masterclass. Sign up at masterclass.com slash Lex to get a discount and to support this podcast.

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but it's available everywhere else too. Once again, download it at ExpressVPN.com slash Lex pod to get a discount and to support this podcast. And now here's my conversation with Vitalik buterin. So before we talk about the fundamental ideas behind Ethereum, cryptocurrency, perhaps it would be nice to talk about the origin story of Bitcoin and the mystery of Satoshi Nakamoto. You give a talk that started with asking the question, what did Satoshi Nakamoto actually invent? Maybe you could say, who is Satoshi Nakamoto and what did he invent? Sure. So Satoshi Nakamoto is the name by which we know the person who originally came up with

Bitcoin. So the reason why I say the name by which we know is that this is a anonymous fellow who has shown himself to us only over the internet just by first publishing the white paper for Bitcoin, then releasing the original source code for Bitcoin, and then talking to the very early Bitcoin community on Bitcoin forums. And if interacting with them and helping the project along for a couple of years. And then at some point in late 2010 to early 2011, he disappeared. So Bitcoin is a fairly unique project and how it has this kind of mythical, like quasi-godlike founder who just kind of popped in, did the thing, and

it disappeared, and we've somehow just never heard from him again. So in 2008, so the white people was the first, do you know, the white people was the first time the name would actually appear, Satoshi Nakamura. I don't believe so. So how is it possible that the creator of such an impactful project remains anonymous? That's a tough question and there's no similarity to it in history of technology as far as I'm aware. Yeah, so one possibility is that it's health in it because health in it was also active in the Bitcoin community and as health and he and those two beginning years and how was he?

Anthony maybe. I see one of the people in the end of early SaferPunk community. He was a computer scientist. He is a computer scientist, cryptographers, people interested in like technology, internet freedom, like those kinds of topics. It was the correct that that rather that he seemed to have been involved in either the earliest or the first transaction of Bitcoin. Yes. The first transaction of Bitcoin was between Satoshi and Alfinnay. Do you think he knew who Satoshi was? If he wasn't Satoshi, you probably know. How is it possible to work so closely with people and nevertheless,

not know anything about their fundamental identity? Is this like a natural sort of characteristic of the internet? I give you a word to think about it because you and I just met now. There's a depth of knowledge that we now have about each other that's like physical. Like my vision system is able to recognize you. I can also verify your identity of the uniqueness. Like, it's very hard to fake you being you. So the internet has a fundamentally different quality to it, which is just fascinating. Maybe I'll talk to that. Yeah, I know this is definitely interesting, as I definitely just know a lot of people

just by their internet handles. And to me, when I think of them, like I see their internet handles, and one of them has a profile picture is this kind of face that's kind of not quite human with a bunch of kind of psychedelic colors in it. And when I visualize him, I could just visualize that. That's not an actual face. Yeah.

You are the creator of the second, well, he's currently the second most popular Captain Cur, Ethereum. So on this topic, if we just stick on Satoshi Nakamoto for a little bit longer, you may be the most qualified person to speak to the psychology of this anonymity that we're talking about.

Like, your identity is known. Like, I've just verified it. But from your perspective, what are the benefits in the creative cryptocurrency and then remaining anonymous? Like if we can psychoanalyze Satoche Nakamoto, is there something interesting there? Or is it just a peculiar quark of him? It definitely helps create this kind of image of this, that, a neutral thing that doesn't belong to anyone. And then you created a project. And because you're anonymous and because you also have a disappear or as unfortunately

happened to help any if that is him. He ended up by, I think, dying of a Lugeric disease and he's in the cryogenic freezer now. But like if you pop in and you, and you created and you're gone and all that's remaining of that whole process is the thing itself, then like no one can go and try to interpret any of your other behavior. And so I know understand like, oh, this, like, this person wrote this thing in some essay at age 16, where he expressed particular opinions about democracy. And so because of that, this project is like, is a statement that's trying to do this specific thing. Instead, it creates this environment where the thing is what you make of it. It doesn't have the, yeah, right, the burden of your other ideas, political thought and so on.

So now that we're sitting with you, do you feel the burden of being kind of the face of Ethereum? I mean, there's a very large community of developers, but never us. Yeah. Is there like a burden associated with that? There definitely is. This is definitely a big reason why I've been trying to kind of push for the Ethereum ecosystem to become more decentralized in many ways. They just encourage a lot of kind of core Ethereum work to happen outside of the Ethereum foundation and of expanding the number of people that are making different kinds of decisions having multiple software

bulletations instead of one and all of these things. There's a lot of things that I've tried to do to and remove myself as a single point of failure because that is something that a lot of people criticize me for. So if you look at like the most fundamentally successful open source projects, it seems that it's like a sad reality when I think about it, is it seems to be that one person is a crucial contributor often. If you look at Linus from a little for Linux, for the kernel, that is possible. And I'm definitely not planning to disappear. That's an interesting tension that projects like this kind of desire,

a single entity, and yet they're fundamentally distributed. I don't know if there's something interesting to say about that kind of structure and thinking about the future of cryptocurrency, does there need to be a leader? There's different kinds of leaders, you know, there's dictators who control all the money, there's people who control organizations, there's kind of high priests that just have themselves and their Twitter followers. What kind of leader are you, would you say? In these days, actually, a bit more in the high priest direction than before. Yeah.

Like, I definitely actually don't do all that much of kind of going around and like ordering Ethereum foundation people to do things because I think those things are important. If there's something that I do think is important, I do just usually kind of say it publicly or just kind of say it to people and quite often projects just going to start doing it. So let's ask the high philosophical question about money. Yeah. What at the highest level is money? What is money?

It's a kind of game and it's a game where we have points and if you have points, there's this one move where you can reduce your points by a number and increase someone else's points by the same number. And these are a fair game, hopefully. Well, it's points by the same number. And these are... So it's a fair game, hopefully. Well, it's one kind of fair game. Like for example, you can have other kinds of fair games. Like you're going to have a game where if I give someone a point and you give someone

a point, then instead of that person getting two points, that person gets four points. And that's also fair. But money is easy to set up and it serves a lot of useful functions. And so it kind of just survives in society as a meme for in a thousand of years. It's useful for the storage of wealth. It's useful for the exchange of value. And it's also useful for denominating future payments to my account. A unit of account. So what if you look at the history of money in human civilization, just that if you're

a student of history, like how has its role or just the mechanisms of money changed over time in your view, even if we just look at the 20th century before and then leading up to cryptocurrencies, that's something you think about. Yeah, and I think the big thing in the 20th century is kind of we saw a lot more intermediation, I guess. The first part is kind of the move from adding more of different kinds of banking. And then I used, we saw the move from an of dollars being backed by gold to dollars being backed by gold. That's only redeemable by certain people to dollars, not being backed by anything, um, to, and if

says, this, uh, if says to worry, have a bunch of free floating currencies and then people getting good bank accounts and then those things becoming e-luxer on it, people getting accounts with payment processors that have bank accounts. So what do you make of that? This is a fastening philosophical idea that money might not be backed by anything. Is that like the fascinating to you that money can exist without being backed by something physical? It definitely is. What do you make of that? How is that possible? Is that stable? If you look at the future of human civilization, is it possible to have money at the large scale at such a hugely productive and rich societies

Be able to operate successfully without money being backed by anything physical? If you like the interesting thing about the 21st century especially is that a new a lot of the important valuable things They're not backed by anything like if you look at like tech companies for example like something like Twitter Yeah backed by anything. Like if you look at like tech companies, for example, like something like Twitter, good. You could theoretically imagine that if all of the employees wanted to, they could kind of come together, they would quit and you know, start working on Twitter 2.0 and then the value of and just kind of build the exact same product or force possibly build a better product and then just kind of

continue on from there and the original Twitter would kind of just not have people left anymore, right? Like the, there is theoretically kind of code and like IP that's owned by the company, but in reality, like good programmers could probably rewrite all that stuff in three months. So, the reason why the thing has value is just kind of network effects and coordination problems, right, like these employees in reality, aren't going to switch all at once.

And also, the users aren't all going to switch at once because it's just difficult for them to switch at once. And so, there's these and if meta-stable and if equal embryo and interactions between thousands and millions of people that are just actually quite sticky even though if you try to kind of assume that everyone's a perfectly rational and kind of perfectly solipuristic or calcoun, they don't seem to exist at all. and kind of perfectly slippery spherical cow that don't seem to exist at all. That's stickiness.

Do you have a sense of grasp of the fundamental dynamic, like the physics of that stickiness? It seems to work, but and I think some of the cryptocurrency ideas kind of rely on it working. Yeah, it's a sort of thing that's definitely been economically modeled a lot. Like one of the kind of analogy of something similar that you often see in textbooks is like,

what is a government like if for example, like 80% of people in a country just like tomorrow suddenly had had the idea that like The laws that are currently the laws in the government the currently is the government are just people and some us and some other thing It is the government and they just kind of start acting like it then that will kind of become the new reality And then the question is well what happens if and if Between zero 180 people or or an 80% of people start believing that. And like what is the thing you all, you see is that if there is one of these kind of switches happening is kind of revolution, then if you're the first person to join, then you probably,

don't have the incentive to do that. But then if you're the 55% out person to join, then suddenly becomes quite safe too. And so it's definitely is the sort of thing that you can and if try to analyze it, understand mathematically, but one of the and if results is that the sort of like when the switch happens definitely can be chaotic sometimes. Yeah, but still like to me, the idea that the network of when the switch happens definitely can be chaotic sometimes. Yeah, but still like to me, the idea that the network affects the the fact that human beings at a scale like millions, millions can share even the idea of currency, like all agree. That's just

I know economics can model it. I'm a skeptic on economic. It's like, so my favorite sort of field, maybe recreationally, psychology is trying to understand human behavior. And I think sometimes people just kind of pretend that they can have a grasp on human behavior, even though it's such a messy space that all the models that psychology or economics those different perspectives on human behavior

can have are difficult. It's difficult to know how much that's wishful thinking and how much it is actually getting to the core of understanding human behavior. But on that idea, what do you think is the role of money in human motivation? So do you think money from an economic perspective, from a psychology perspective, is core to the human desires?

Money is definitely very far from the only motivator. It is a big motivator and it's one of the closest things you have to a universal motivator. Because ultimately in like almost any person in the world if you ask them to do something like they'll be more inclined to do it if you also offer some offer the money, right? And that's like there's definitely many cases where people will do things other than things that maximize how much money they have and that happens all the time. But, like, though a lot of those other things are kind of much more specific to, and of

who that person is, and of where their situation is, the relationship between the motive and the action and these other things. What do you think is the interplay of the other motivator from, like, Nietzsche in respect of his power? Do you think money equals power? Do you think those are conflicting ideas? is an interplay of the other motivator from like Nietzsche, respect is power. Do you think money equals power? Do you think those are conflicting ideas? Do you think, I mean, that's one of the ideas that decentralized currency, decentralized applications

that are looking at is who holds the power? Yeah. Money is definitely a kind of power. And there's definitely people who want money because it gives them power. And then even if money doesn't seem to and if explicitly be about money, a lot of things that people spend money on are ultimately about and of social status of some kind. So I definitely view those two things as interplaying. And then there's also money as just a way of measuring how successful you are as a scoreboard,

right? So this kind of gets back to the game. If you have $4 billion, then the main benefit you get from going up, well, one of the big benefits you get from going up to $6 million that now, instead of being below the guy who has five year above the guy who has five. So you think money could be kind of, in the game of life, it's also a measure of self-worth. Is that how we,

it's definitely how a lot of people perceive it. Define ourselves in a hierarchy of society. Yeah, not saying it's kind of a healthy thing that people define theirself worth as money because it's definitely a far from a perfect indicator of how much you value, you provide the society or anything like this. But I definitely think that as a matter of kind of correct practice, so much of people do feel that way. So what does utopia from an economic perspective look like to you?

What does the perfect world look like? I guess the economists, utopia would be one where kind of everything is an incentive aligned in the sense that there aren't kind of conflicts between what satisfies your goals and kind of what is good for and of everyone in the world as a whole. What do you think that would look like? Does that mean there's still poor people and rich people, there's still income inequality? Do you think sort of Marxist ideas are strong? Do you think sort of ideas of objectivism like where the market rules is strong?

Like what is there different economic philosophies that just seem to be reflective what a utopia would be? So I definitely think that existing economic philosophy is due end up kind of systematically and of deviating from the utopia in a lot of ways. Like one of the big things I talk about, for example, is public goods, right? And public goods are especially important on the internet, right? Yeah, it's like the idea is what's kind of money as this game where, you know, I lose a few coins,

a few coins and you gain the same number of coins is that this usually happens in a trade where I lose some money, you gain some money, you lose a sandwich and I gain a sandwich. And this kind of model works really well when the thing that we're using money to incentivize this kind of private goods, right, things that you provide to one person or the benefit comes to one person. But the, like, on the internet, especially, but also many, many contacts kind of off the internet, there's many, many contexts and if off the internet there's actions that an individual's or groups can take where instead of the benefit going to one person, the benefit just goes to many people at the same time and you can't control where the benefit

goes to, right? So for example, this podcast and we publish, and when it's published, you don't have any fine grains control over, oh, these 38,000 people can watch it, and then these others 29,000 people can't. It's like once the number goes high enough, then people will just copy it. And then when I write articles on a blog, then they're just free for everyone, and that stuff's even harder to prevent anyone from copying. So aside from that, things like, you know, scientific research, for example,

and even taking more pedestrian examples, like climate change mitigation would be a big one. So there's a lot of things in the world where you have these kind of individual actions with enough concentrated cost and distributed benefits and money as a point system does not do a good job of encouraging these things. And one of the kind of other things, even, I remember kind of 10-gearch, and we connected to crypto, but kind of theoretically outside of it that I work on, is this mechanism called quadratic funding. crypto, but kind of theoretically outside of it that I work on is this mechanism called quadratic

funding. And the way to think about it is, and if imagine a point system where if one person gives coins to one other person, then it works the same way as money. But if multiple people give coins to one person, and they do so anonymously, so it's kind of not in consideration for a specific service to that person themselves, then the number of coins received by that person is kind of greater than just the sum of the number of coins that have given by those different people. So the actual formula is you take the square root of the amount that each person gave, then you add all the square roots and then you add a square of the sum. Yeah, and then you give that. And the idea here would basically be that if,

let's say, for example, you just start going off and kind of planting a lot of trees, and there's a bunch of people that are really happy that you're planting trees. So they go and all kind of throw a coin your way. Then the there is like basically the fact that kind of you get more than the sum, you get this kind of square of some of these of square roots of these tiny modes. As that this actually kind of compensates for the tragedy of the comments, right? And there's even this kind of mathematical proof that it's sort of optimally compensates for it. What is the tragedy of the comment? This is just this idea that if there is this situation where there's some public good

that lots of people benefit from, then no individual person wants to contribute to it, because if they contribute, they'll only get a small part of people benefit from, then no individual person wants to contribute to it, because if they contribute, they only get a small part of the benefit from their contribution, but they pay the full cost of their contribution. In which context is this, sorry, what is the term quadratic funding? Quadratic funding, yes,

quadratic funding. Like what's in which context is this mechanism useful? So obviously you said to combat the tragedy of the comments, but in which context do you see it as useful as you practice this? Yeah, theoretically public goods in general, right? So like, like services, like what are we talking about? What's the public? So within the Ethereum ecosystem, for example, like we've actually tried using this mechanism, I mean, yeah, wrote a couple of articles about us center of on vatalic.ca where I go through

some of the most recent rounds and it's been really interesting. Some of the top ones that people supported, there were things like just online user interfaces that make it easier for people to interact with Ethereum. There was a documentation, there were podcasts, there were software and clients, like implementations of the Ethereum protocol, privacy tools, just like lots of things that are useful to lots of people. There weren't a lot of people contributing funding, a particular entity. And it's really interesting.

There's something special about the quadratic, the summing of the square roots and the square. Yeah. So another way to think about it is, imagine if N people each give a dollar, then the person gets N squared. way to think about it is like imagine if N people each give a dollar, then the person gets N squared. Right. And and so each individual person's contribution gets multiplied by N right because they have N people. And so that kind of perfectly compensates for the kind like kind of N to one tragedy of the comments. I just wonder if the the squared part is

off on the mental. No, it is. I'd'd recommend you go to on vitalic.ca. I have this article called quadratic payments of primer and highly recommended it, and at least my attempt so far and of exploiting the intuition behind this intuition. So if we could, can we go to the very basic? What is the blockchain or perhaps we might even start at the Byzantine general's problem, Byzantine fall tolerance in general, that I

Bitcoin was taking steps to providing a solution for. So the Byzantine general's problem is this paper that Leslie Lamport published in 1982, where he has a thought experiment where if you have two generals that are kind of camped out on opposite sides of a city, and they're planning when to attack the city, then the question is, and if how could those generals coordinate with each other?

And they could send messengers between each other, but those messengers could get sniped by the enemy on the road. Road, some of those messages could end up being traitors, and if things could end up happening. And with just the two mess generals, it turns out that there's kind of no solution in a finite number of rounds that guarantees that they will be able to kind of coordinate on the same answer. But then in the case

where you have more than two generals, then less than we analyze this case is like, are the message messages kind of just oral messages, are the messages kind of signed messages. So I can give you a sign message and you can pass along that sign message. And the third party gets to verify that I originally made that message. And depending on those different cases, there's kind of different bounds on, like, given how many generals and how many traders among those generals and what like under what conditions you actually can't agree once a launch an attack. So it's actually a big misconception that the Byzantine general's problem was unsolved, so less than a report solved it. The thing that was unsolved, though, is that all of these solutions assume that you've already agreed on a fixed list of who the generals are.

And these generals have to be kind of semi-trust at some extent. They can't just be anonymous people because if they're anonymous, then like the enemy could just be 99% of the generals. So, So in the 1980s and the 1990s, kind of the general use case for distributed system stuff was more kind of enterprisey stuff where you could kind of assume that who the nodes are that are running these NF computer networks. So if you want to have some and a decentralized computer network that pretends to be a single computer and that you can kind of do an operations on, then it's made out of these and a 50 and specific computers. And we know who and where they are.

And so we have a good reason to believe that, say, at least 11 of them would be fine. And it could also be within a single system, almost a network of devices, sensors, so on like in airplanes. And I think like fly systems in general still use these kinds of ideas. Yep, yep.

So that's the 80s. That's the 80s and 90s. Now the CypherPunks had a different use case in mind, which is that they wanted to create a fully decentralized global provision with currency. And the problem here is that they didn't want any authorities, and they didn't even want any kind of privileged list of people. And so now the question is, well, how do you use these techniques to create consensus when you have no way of kind of measuring identities, right? You have no way of determining whether or not some 99% of participants are actually all

the same guy. And so the clever solution that Satoshi had, this is kind of going back to that presentation. I made a devcon a few months ago where I said that the things that she invented was crypto economics is this really neat idea that you can use economic resources to kind of limit identity, how many identities you can get. And the if there isn't any existing decentralized digital currency, then the only way to do this is with proof of work. Right. So with proof of work, the solution is just you publish a solution to a hard mathematical puzzle that takes some kind of clearly calculable amount of computational power to solve, you get an identity. And then you solve five of

those puzzles, you get five identities. And then these are the identities that we run the consent to sell growth in between. So the proof of work mechanism you just described is like the fundamental idea proposed in the white paper that defines Bitcoin. What's the idea of consensus that we wish to reach. What wise consensus important here? What is consensus? So, the goal here in just simple technical terms is to basically kind of wire together a set of a large number of computers in such a way that they kind of pretend to the outside world to be a single computer, where that single computer keeps working even if a large portion of the kind of

constituents, the computers that make it up break, it kind of break in arbitrary ways, like they could shut off, they could try to actively break a system, they could do lots of mean things. So the reason why the CypherPunks wanted to do this is because they wanted to run one particular program on this virtual computer. And the one particular program that they wanted to run is just a currency system, right? It's a system that just processes a series of transactions. And for every transaction, it verifies that the sender has enough coins to pay for the transaction and verifies that the digital signatures correct and if the checks passed and it Subtracks the coins from one account to nads to coins to the other account roughly

So first of all the the proof of work idea is kind of I mean at least to me seems pretty fascinating it is I mean that's a kind of revolutionary idea. I mean, is it obvious to come up with that you can use, you can exchange basically computational resources for, for identity? It's, it actually has a pretty long history. It was first proposed in a paper by a McSinfia Dwork and the NNN in 1994, I believe. And the original use case was a combating email spam. So the idea is that if you send an email, you have to send it with a proof of work attached. And like this makes it reasonable, cheap to send emails to your friends, but it makes it really expensive to send spam to a million

people. Yeah, that's a simple brilliant idea. So maybe also taking a step back. So what is the role of blockchain in this? What is blockchain? Sure. So the blockchain, my way of thinking about it is that it is this kind of system where you have this kind of one virtual computer created by

this a bunch of these nodes in the network. And the reason why the term blockchain is used is because the data structure that these systems use that we so far is one where they have different nodes in the network periodically published blocks and And a block is a list of transactions together with a pointer, like a hash of a previous block that it builds on top of. And so you have a series of blocks that nodes in the network create

for each block points to the previous block and so you have this chain of them. Is fault tolerance mechanism built into the idea of block chain? Or is there a lot of possibilities of different ways to make sure there's no funny stuff going on? There are indeed a lot of possibilities. So in a kind of just simple architecture as I just described, the way the fault tolerance happens is like this, right?

So you have a bunch of nodes and they're just happily and evocationally creating blocks, building on top of them, each other's blocks. And let's say you have one block, we'll call it kind of block one. And then someone else builds another block on a steel called block two, then we have an attacker.

And what the attacker tries to do is the attacker tries to revert block two. And the way the revert block two is instead of doing the thing they're supposed to do, which is build a block on top of block two. They're gonna build another block on top of block one. So you have block one, which has two children block two and then block two prime.

Now, this might sometimes even happen by random chance if two nodes in the network just happen to create blocks at the same time and they know here about each other's things before they create their own. But this also could happen because of an attack. Now if this happens, you have an attack, then the Bitcoin system, the nodes follow the longest chain. So if this attack can happen, and when the original chain had more than two blocks on it, so if it was trying to kind of revert more than more than two blocks,

then everyone would just ignore it, and everyone would just keep following the regular chain. But here, you know, we have block two, and we have block two prime. And so the two are kind of even. And then whatever block, the next block is created on top of. So say block three is now created on top of block two prime. Then everyone agrees that block three is then you head. And block two prime is just kind of forgotten. And then everyone's just kind of peacefully built on top of block three. And then think continues. So how difficult is it to mess with the system? So how like if we look at the general problem like how many what fraction of people who participate in the system have to be

bad players in order to mess with it truly, is there a good number? There is. Well, depending on kind of what your model of the participants is and like what kind of attackers are talking about, it's anywhere between 23.2 and 50 percent of all of the computing power in the network. Sorry. So 22 and 53 point between 23.2 and 50 percent. 50 percent can be compromised. So once your portion of the total computing power in the network

goes above the 23.2 level, then there's kind of things that you can mean things that you can potentially do. And as your percentage of the network kind of things that you can mean things that you can potentially do. And as your percentage of the network kind of keeps going up, then the your ability to do mean things kind of goes higher. And then if you have above 50%, then you can just break everything. So how hard is it to achieve that level? Like it seems that so far historically speaking has been exceptionally difficult. But so... This is a challenging question. So the economic cost of acquiring that level of stuff from scratch is fairly high. I think it's somewhere in the low billions of dollars.

And when you say that stuff, you mean computational resources? I do. Yeah. So specifically specialized hardware and of ASICs that people use to solve these puzzles. So do the mining. Small, small tangent. So obviously I work a lot in deep learning. Would you be using ASICs for that application?

And I tend to actually kind of hear that so many of these, you know, sometimes in VHP users sold out. Because of the other application. Like what do you, if you can comment, I don't know if you're familiar or interested in the space, what kind of asix, what kind of hardware is generally used these days to do the actual computation for the proof of work? Sure. So in the case in Bitcoin and Ethereum are a bit different. So in the case of Bitcoin, there is an algorithm called

SHA-2FD6. It's just a hash function. And so the puzzle is just coming up with a number where the hash of the number is below some threshold. And so because the hashes are designed to be random, you just have to keep on trying different numbers until one works. And the ASICs are just like specialized circuits that contain and circuits for evaluating this hash over and over again. And you have like millions or billions of these hash evaluators and just stacks on top of each other inside of a box. And you just keep on running the box 24-7. And the A6, there's literally specialized hardware

designed for this. Yes. This is a living and amazing world. Another tangent, I'll come back to the basics, but does quantum computing throw a wrench into any of this? Very good question. So what one, some computers have two main, and a families of algorithms that are relevant to cryptography, one is a shores algorithm, ensures algorithm is one that kind of

completely breaks the hardness of some specific kinds of mathematical problems. So the one that you've probably heard of is it makes it very easy to factor numbers. So figure out kind of what prime factors are that kind of that you need to multiply together to get some number, even if that number is extremely big. Shores algorithm can also be used to break

and look to curve cryptography. It can break like any kind of hidden order groups. It breaks a lot of kind of cryptographic nice things that we're used to. But the good news is that for every kind of major use of things that sure as algorithm breaks, we already know of quantum proof alternatives. Now, we don't use these quantum proof alternatives yet

because in many cases, there are five to 10 times what's efficient, but the crypto industry in general kind of knows that this is coming eventually and it's kind of ready to take the head and switch to that stuff when we have to. The second algorithm that is relevant to cryptography is Grover's algorithm. Grover's algorithm might even be a more familiar to AI people. It's basically usually described as solving search problems.

But the idea here is that if you have a problem over the form, find a number that satisfies some property. Then if with a classical computer, you need to try and if n times before you find the number, then with a quantum computer, you only need to do square root of n computations. And grovers could potentially be used for mining, but there's two possibilities here. One is that grovers could be used for mining. And whoever creates the first working WhatsApp computer that could do grovers will just mine way faster than everyone else. And we'll see another round of what we saw when ASICs came out, which is that kind of the new hardware just kind of the new hardware

just kind of dominated the old stuff. And then eventually it's which when you equal a room. But by the way, way faster, not exponentially faster, quite radically faster, which is not sort of, it's not game changing, I would say. It's like A6, like you said, it would be. Exactly. Yeah. So it would not necessarily break proof of work as a thing. That's right. Yeah.

Now, the other kind of possible world, right, is that quantum computers have a lot of overhead. There's a lot of and a couple of accident involved in maintaining quantum states. And there's also, as we've been realizing recently, making quantum computers actually work requires a quantum error correction, which requires kind of a thousand real qubits, per logical qubit. And so there's the very real possibility that the overhead of running a quantum computer will be higher than the speed up you get with grovers, which would

be kind of sad, but which would also mean that given proof of work, we'll just keep working fine. So the beautifully. So proof of work is the core idea of Bitcoin. Is there other core ideas before we kind of take a step towards the origin story and ideas of Ethereum? Is there other stuff that work key to the white paper of Bitcoin? There is proof of work and then there is just the cryptography is just kind of public keys and signatures that are used to verify transactions. There's two of the big things. So then what is the origin story, maybe the human side,

but also the technical side of Ethereum? Sure. So I joined the Bitcoin community in 2011. And I started by just writing. I first wrote for this sort of online thing called Bitcoin Weekly. Then I started writing for Bitcoin magazine. Sorry to interrupt you. This funny kind of story, true or not, is that your dissolution by the downsides of centralized control from your experience with wow, a world of our craft.

Is this true or you're just being witty? I mean, the event is true of the fact that that's the reason I do decentralization is witty. Maybe just a small tangent. Have you always had a skepticism of centralized control? Is that sort of a- So it's not agreeing yet? Has that feeling evolved over time or has that just always been a core feeling that

decentralized control is the future of a human society? And it's definitely been something that felt very attractive to me ever since I could have or that such a thing as possible. It's possible. Even. Yeah. So great. So you were, you joined the Bitcoin community in 2011. You said you began writing. So what was next? Started writing moved from high school to university a half way in between that and spend a year in university

Then at the end of that year I had dropped out to do Bitcoin things full-time And this was a combination of continuing to write Bitcoin magazine, but also increasingly work on software projects. And I traveled around the world for about six months and just going to different Bitcoin communities. Like I went to first and you hamster, then Spain, other European places, Israel and San Francisco, and along the way, and I've met a lot of other people that are working on different Bitcoin projects. And when I was in Israel, there were some kind of various smart teams there that were working on ideas that people were starting to kind of call Bitcoin 2.0.

So one of these were scolored coins, which is basically saying that, hey, let's not just use the blockchain for Bitcoin, but let's also kind of issue other kinds of assets on it. And then there was a protocol called Mastercoin that supported issuing assets, but also supported many other things like financial contracts, like domain name registration, and a lot of different things together. And I spent some time working with these teams. And I quickly realized that this mastercoin protocol could be improved by generalizing it more.

So the analogy I use is that the mastercoin protocol was like this with Sarmine if you have 25 different transactions types for 25 different applications. But what I realized is that you can replace a bunch of them with things that are more general purpose. So one of them was that you can replace like three transactions types for three types of financial contract with a generic transaction type for a financial contract that just wants you to specify a mathematical formula for kind of how much money each side gets. By the way, the small pause, what's, you say financial contract, just the terminology, what is the contract? What's a financial contract?

So this is just generally an agreement where kind of either one or two parties kind of put collateral kind of in, and then they depending on certain conditions, like this could involve prices of assets, this could involve the actions of the two parties, it could involve other things. They kind of get different amounts of assets out that it just depends on things that happened. So a contract is really a financial contract as at the core, it's the core interactive element of a financial system. Yeah, there's many different kinds of financial contracts. There's things like options where

you kind of give someone the right to buy a thing that you have for some specific price for some period of time. There's contracts for difference where you basically are kind of making a bet that says like for every dollar this thing goes up I'll give you $7 or for every dollar that thing goes down. You give me $7 or something like that. But the main idea that these contracts have to be enforced and trusted. Yes, exactly. You have to trust that they will work out in a system where nobody can be trusted. Yes. This is such a beautiful, complicated system. Okay, so you are seeking to kind of generalize

this basic framework of contracts. So what is that in tail? So what technically are the steps to creating a theorem? Sure. So I guess just to kind of continue a bit with this master coin story. So started by a kind of giving ideas for how to generalize the thing. And eventually, this turned into a much more kind of fully flesh proposal that just says, Hey, how

about you scrap all your futures? And instead, you just put in this programming language. And I gave this idea to them and their response was something like, Hey, this is great, but this seems complicated and this seems like something that's, we're not going to be able to put on to our roadmap for a while. And my response to this was like, wait, do you not realize how our evolution area this is? Well, I'll just go do it myself. And then I was the name of the programming language. I just called it ultimate scripting.

So then I kind of went through a couple more rounds of iteration and then the idea for Ethereum itself started to form. And the idea here is that you just have a blockchain where the core unit of the thing is what we call contracts. It's these and if accounts that can hold assets and that they have their own internal memory, but that are controlled by a piece of code. And so if I send some ether to a contract, the only thing that can determine where that kind of ether, the currency inside Ethereum might have goes after that is the code of that

contract itself. And so basically, kind of sending assets to computer programs becomes this kind of paradigm for creating these kind of a green self-executing agreements. Self-executing, as so cool the code is sort of part of this contract. So that's what's meant by smart contracts. Yeah, so how hard was it to build this kind of thing? Harder than expected. And originally I actually thought that this would be a thing that I would kind of casually work on for a couple of months, publish, and then go back to university.

Then I released it and a bunch of people, or I released a white paper. White paper, the idea is there. The idea, the white paper. A whole bunch of people came in offering to Howl, a huge number of people and expressed interest. And this was something I was totally not expecting. And then I kind of realized that this would be something that's kind of much bigger than I had ever thought that it would be. And then we started on this kind of much longer development slog of making something that has lifted up to this sort of much higher level of expectations. What are the some of the

Is it fundamental like software engineering challenges? It was they're social. Okay, so there's social So what are the biggest interesting challenges that you've learned about Human civilization and in in software engineering through this process? So I guess one of the challenges for me is that I'm one of the apparently unusual geek schools and have never treated with anything but kindness in school. And so when I got into crypto, I kind of expected everyone would just kind of be the same kind of altruistic and nice in that same way. But the, the algorithm that I used for finding co-founders for this thing was not very good. It was, and if literally one computer scientist called the greedy algorithm, it's kind of the first

15 people who applied back offering to help kind of are the co-founders. Oh, you mean like literally the people that form, will form the founders, co-founders of the community. The algorithm, I like how you call it the algorithm. Yeah, and so what happened was that these, like especially as the project got really big, like they started to be a lot of this kind of infighting and there were a lot of, like I wanted the thing to be a nonprofit and some of them wanted to be a for-profit.

And then there started to be people who were just kind of totally unable to work with each other. There were people that were kind of trying to get an advantage for themselves in a lot of different ways. And this just about six months later, led to this big governance crisis. And then we got a reshuffled leadership a bit. And then the project kept on going. Then nine months later, there was another governance crisis. And then there was a third governance crisis. And so is there a way to, if you're looking at the human

side of things, is there a way to optimize this you're looking at the human side of things, is there a way to optimize this aspect of the cryptocurrency world? It seems that there is, from my perspective, there's a lot of different characters and personalities and egos. And like you said, I don't know, you know, I also like to think that most of the world, most of the people in the world are well-intentioned, but the way those intentions are realized may perhaps come off as negative. Like, is there a hopeful message here about creating a governance structure

for cryptocurrency that, where everyone gets along? I mean, after about four rounds of resh like, I think we've actually come up with something that seems to be pretty stable and happy. Um, I think, uh, I mean, I definitely do think that, you know, most people are well-intentioned. I just think that like, one of the reasons why I like decentralization is just because there's this thing about power where power attracts people with egos and so that just allows us a very small percentage of people to just ruin so many things. You think ego has a use, like is ego always bad? It seems like sometimes does. But then the Ethereum research team, I feel like we've found also a lot of

very good people that are just primarily just interested in things for the technology. And things seem to just generally be going quite well. Yeah, when you're when the focus and the passion is in the tech. So that's the human side of things. What the technology side, like what have you learned, what have been the biggest challenges of bringing Ethereum to life on the technology side? So I think first of all, just, you know, there's like the first law of software development, which is that when someone gives you a timetable, I'm just wish the unit of time to the next largest unit

of time and had one. And we basically felt victim to that. And so instead of taking those like three months and ended up taking like 20 months to watch the thing. That was just I think underestimating the sheer technical complexity of the thing. There are research challenges like so for example, one of the things that we've been saying from the start that we would do. One is a switch from proof of work to proof of stake. More proof of stake is this alternative consentist mechanism, where instead of having to waste a lot of computing power on solving these mathematical possible said, don't mean anything. You kind of prove that you have access to coins inside of the system.

And this then if gives you some level of participation in the consensus, can you maybe elaborate and let a little bit, I understand the idea of proof of work. I know that a lot of people say that the idea of proof of stake is really appealing. Can you maybe linger on it along or explain what it is? Sure. So basically the idea is like, if I kind of lock up 100 coins, then I turn that into a kind of quote virtual miner and the system itself I know Automatically and randomly assigns that in a virtual miner the right to create blocks at particular intervals And then if someone else has 200 coins and they walk and lock those 200 coins then they get a kind of twice as big virtual binder, they'll be able to create block spices often. And so it tries to do similar things to proof of work, except instead of the thing and of a great limiting your participation being your ability to crank out solutions to kind of hash challenges, the thing that real limits your participation is kind of how much coins

you're kind of locking into this mechanism. Okay, so that limited participation doesn't require you to run a lot of compute. Does that mean that the richer you are? So rich people are more like their identities more. Right, and this stable. are more like their identities more. Right, and this stable. Yeah, very fibrill or whatever, whatever the right terminology is.

Right, and this is definitely a copied critique. I think my usual answer to this is that proof of work is even more of that kind of system. Yes, exactly. Yeah, because I didn't mean it. And that's the same as the criticism. I think you're exactly right. That's equivalent to proof of work is the same

Kind of thing, but in the proof of work you have to also use physical resources Yes, and burn computers and burn trees and all of that stuff is there a Way to mess with the system of the proof of proof of stake There is but you will once again need to have a of proof of stake. There is, but you will once again need to have a very large portion of all the coins that are locked in the system to do anything bad. Got it. So yeah, and just that maybe take a small tangent.

One of the criticisms of cryptocurrencies, the fact that I guess for the proof of work, mechanism, you have to use so much energy in the world. Yes. Is one of the motivations of proof of stake is to move away from this? Definitely. Like what's your sense of that? Maybe I'm just under informed. Is there like legitimately environmental impact from this? Yeah. So the latest thing was that Bitcoin consumed as much energy as the country of Austria or something like that. Yeah. And then Ethereum is like right now, and we've only like half an order of magnitude smaller

than Bitcoin. I've heard you talk about Ethereum 2.0. So what's the dream of Ethereum 2.0? What's the status of proof of stake as a mechanism that Ethereum moves towards? And also, how do you move to a different mechanism of consensus within a cryptocurrency? So, a theory of 2.0 is a collection of major upgrades that we've wanted to do to a theory of them for quite some time.

The two big ones, one is a proof of stake and the other is, you call, sharding. Sharding solves another problem with blockchains, which is scalability. And what sharding does, as it basically says, instead of every participant in the network having to personally download and verify every transaction, every participant in the network only downloads and verifies a small portion of transactions. And then you kind of randomly distribute who gets how much work. And because the distribution is random, it still has the property that you need a large portion of the entire network to corrupt what's going on inside

of any shard, but the system is still in a very redundant and very secure. That's brilliant. How hard is that to implement and how hard is proof of stake to implement? Like on a proof of stake to implement? Like on a technical level, software level. Proof of stake and charting are both challenging. I'd say charting is a bit more challenging.

The reason is that proof of stake is kind of just a change to how the consensus layer works. Sharding does both that, but it's also a change to the networking layer. The reason is that charting is kind of pointless if at the networking layer, you still do what you do today, which is you kind of gossip everything, which means that if someone publishes something every other node and the client hears it from on the networking layer. And so instead we have to have some networks and the ability to quickly switch between some networks and have the some networks talk to each other.

And this is all doable, but it's a more complex architecture. It's definitely the sort of thing that has not yet been done in cryptocurrency. So most of the networking layer in cryptocurrency is your shouting, you like broadcast messages. And this is more like at home networks. Like you're shouting within small work groups. Small group, but you have like a bunch of subnet, like exactly. And you have to switch between, oh man, I'd love to see the,

so it's a beautiful idea. So from a graphic perspective, but just the software that, like who's responsible is the Ethereum project? Like the people involved, would they be implementing? Like what's the actual, you know, this is like legit software engineering. Who, like, how does that work?

How do people collaborate, build that kind of project? Is this like almost, like, is there a software engineering lead? Is there, is there a legit almost, like, large scale open source part? There is. Yeah. So we have someone named Danny Ryan on our team who's just been brilliant and great all around and he is a kind of de facto kind of development coordinator, I guess. It's like you have to invent job titles for this stuff. The reason is that like we also have this unique kind of

organizational structure where they hear M Foundation itself and have does research in house, but then the actual implementation is done by independent teams that are separate companies and they're located all around the world and fun places like Australia. And so you kind of just need a bunch of and almost non-stop cat hurting to just keep getting these people to and if talk to each other and kind of implement this back, make sure that everyone agrees on what's going on and kind of how to interpret different things. So how far into the future are we

from these two mechanisms in Ethereum 2.0? Like what's your sense of the timeline? Keeping in mind the previous comments you made about the sort of general Curse of software projects. So Ethereum 2.0 is split into three phases. So phase zero just creates a proof-stake network And it's actually separate from kind of separate from the proof-of-work network at the beginning, just to give it time to grow and improve itself. Do people get to choose, sorry, to interrupt? Do people get to choose, I guess, which concept?

Yes, they get to choose to move over if they want to. Then Phase 1 adds sharding, but it only adds sharding of data storage and not sharding of computation. And then after that, there is a merger phase, which is where the accounts, kind of smart contracts, like all of the activity on the existing ethos system, just kind of gets cut and paste it into eth too. And then the proof of work chain gets forgotten and then things, all the things that we're living there before, and just kind of continue living inside of the proof

of stake system. So for timelines, Phase 0 has been, I know, almost fully implemented and now it's just a matter of a whole bunch of security auditing and testing. My own experience is that right now it feels like we're at about a phase comparable to when we were doing the original Ethereum launch when we were maybe about four months away from launch. That's just a hunch. That's just a hunch. Yeah. So how, you know, it took, it took like over a decade for people to move from Python to Python 3. How do you see the move from like this phase zero of, for different concepts of mechanism?

Do you see there being a drastic phase shift in people just kind of jumping to this better mechanism? Addrastic face shift in people just kind of jumping to this better mechanism. So in phase zero, I don't expect too many people to do much because in phase zero and phase one, the new chain The gative development, and if it doesn't have too much functionality turned on. It's there just like if you want to be a proof of stake Validator, you can get things started if you want to store data for other blockchain applications. You can get started But existing applications will largely keep a living on East one. And then when the merger happens, then the merger is a operation that happens all at once. So that's one of the benefits of a consensus system that on the one hand, you have to coordinate the upgrade, but on the other hand, the upgrade can be coordinated. So what's Casper FFG?

By the way, Casper FFG is the consensus algorithm that we are using for other proofs. Is there something interesting specific about Casper FFG? Like some beautiful aspect of it that's... There he is. So Casper FFG combines together kind of two different schools of like is that cell growth of design. So the general two different schools of the design are right. One is 50% fault tolerant, but dependent on network synchrony. So 50% fault tolerant, but it's it's already up to 50% of of false but not more, but it depends on an assumption that all of the nodes can talk to each other within some an implemented

period of time. If I send a message, you'll receive it within a few seconds. And the second a school is 33% false tolerant, but safe under a synchrony, which means that like if we agree on something, then that thing is finalized. And even if the network goes horribly wonky the second after that thing is finalized, there's no way to revert that thing. And that's fascinating how you would make that happen. It's definitely quite clever.

I recommend the CastB FFG paper. If you just search archive as it, like ARX IV Casper FFG, it's right there. That's an archive, the papers on archive. Yeah, who are the authors? Myself and the Virgil Griffith. That's awesome. I take a small tangent.

This idea of just putting out white papers and papers and putting them on archive and just putting them publicly, is that at the core? Is that a necessary component of particular currencies that the tradition started with Satoshi Nakamoto? What do you make of it? What do you make of the future of that kind of sharing of ideas? I guess so, yeah. It's definitely something that's kind of mandatory for crypto,

because crypto is all about making systems where you don't have to trust the operators to trust that the thing works. And so if anything behind our system works, it's closed sourced and that kind of kills the point. And so there is the kind of a sense in which the fun debates all properties of the category of the thing which Magnum Bill just kind of forces openness, but also openness just has proven to be a really great way to collaborate. And then there's actually a lot of innovation and academic collaboration that's just kind of happened at Hawk in

the cryptospacity the last few years. So like for example, we have this forum called E3Search. That's like ETH or ESEAR and then .CH. And there we publish kind of just ideas in a form that's kind of half formal. Like it's halfway in between. Like it's kind of a text right up and then you can have math in it, but it's often out of much shorter than a paper. And it turns out that the great majority of new ideas, like they're just kind of fairly small nuggets that you can explain in like five to ten lines, and they don't really need

to hold format paper, right? Exactly. They don't require the kind of like 10 pages of an affiliate. So introduction, conclusion is not needed. Yeah. And so instead you just kind of published the idea that people can go comments on it. That's brilliant.

Yeah. This has been great for us. I think I interrupted you. Was there something else on cast graph? I think that's it. So just cast graph of G is just kind of combines together these two schools. And so basically it creates this system where if you have more than 50% that are honest,

then you and you have a network synchrony than the thing kind of goes as a chain. But then if network synchrony fails, then kind of the last few blocks in the chain might kind of get replaced, but anything that was finalized by this kind of more synchronous process gets, can't be reverted. And so you essentially get a kind of best of both worlds between those two bottles.

Okay, so I know what I'm doing to them, but you're reading the CASPER-FGG paper. Apologies for the romanticized question, but what do you are some or the most beautiful idea in the world of Ethereum? Just something surprising, something beautiful, something powerful. Yeah, I mean, I think the fact that money can just emerge out of a database if enough people believe in it, I think is definitely one of those things that's up there. I think one of the things that I really love about Ethereum is also this concept of composability. So this is the idea that if I build an application on top of Ethereum, then you can build an

application that talks to my application and you don't even need my permission, you don't even need to talk to me. So one really fun example of this is there was this kind of game on Ethereum called Crypto Kitties, the just involved kind of breeding digital cats. And someone else created a game called Crypto Dragons, where the way you play Crypto Dragons is you have a dragon and you have to feed in Crypto Dragons, where the way you play Crypto Dragons is you have a dragon and you have to feed it Crypto Kitties. And they just created the whole thing just like as an Ethereum contract that you would

send these tokens that are defined by this other Ethereum contract. And for the interoperability to happen, like the projects and don't really need to Like the teams don't really need to talk to each other. You just kind of interface with the existing program. So it's arbitrarily composable in this kind of way. So you have different Yeah, from groups that can be working and so you could see it scaling to just Outside of dragons and kiddies. you could build entire ecosystems of software. Yeah, I mean, especially in the decentralized finance space

that's been popping up in the last two years, there has been a huge amount of really interesting things happen as a result of this. Is it particular kind of like financial applications kind of thing? Yeah, I mean, there's like stable coins. So this is a kind of tokens retain value. I'm equal to one dollar, but they're kind of backed by a crypt cryptocurrency. Then there's decentralized exchanges.

Um, so when as far as decentralized exchanges goes, there's this and a really interesting construction that has existed for about one and a half years now called Uniswap. So what Uniswap is, it's a smart contract that holds balances of two tokens, we'll call them token A and token B. And it maintains an invariant that the balance of token A multiplied by the balance of token B has the equal the same value. And so the way that you trade against the thing is basically you have this kind of curve,

X times Y equals K. And before you trade, it's at some points on the curve after you trade, you just pick some, any other points on the curve. And then whatever the delta X is, that's the amount of A tokens you provide, whatever the delta Y is, that's the amount of B tokens you provide, whatever the Delta Y is, that's the amount of B tokens you get or vice versa. And that's just, and then kind of the slope at the current

points on the curve kind of is the price. And so that just is the whole thing. And that just allows you to have this exchange for tokens. And even if there's very few participants. And the whole thing is just like so simple and it's just very easy to set up, very easy to participate in. And it just provides so much value to people. And the fundamental, the distributed application infrastructure allows that somehow. Yes, so this is a smart contract meeting. This is all a computer program that's just running Ethereum.

Smart contracts too are just fascinating. They are. Okay, do you think cryptocurrency may become the main currency in the world one day? So what do you think we're headed in terms of the role of currency, the structure, type of currency in the world one day. So what do you think were headed in terms of the role of currency, the structure, type of currency in the world? And I definitely expect some fiat currencies to continue to exist and get to be strong.

And I definitely expect to have fiat currencies to also digitize it their own way over the next couple of decades. What's fiat currency, by the way? Oh, just like things like US dollars, like dollars and euros and yet and these other things. And they're sort of backed by governments. Yes. But I also expect that if cryptocurrency is to play a side of important role in just making sure

that people always have an alternative if via currency start breaking. So if you're in some very high inflation place like Venezuela, for example, or if your country just kind of gets cut off from other financial systems because of something the banks do, if there's even some major trade disruption or something worse happens, then cryptocurrencies are the sort of thing, just because of their global neutrality. They're just always there and you can keep using them. It's interesting that you're quite humble about the possibilities of the future of cryptocurrency. You don't think there's a possible future where it becomes the main set of currency because it feels like

fiat. It feels like the centralized control by governments of currencies limiting somehow, maybe in my naive utopian view of the world. It's definitely very possible. I think for cryptocurrencies being the main form of value to work well, you do need to have some much more price stability than they have today. There are now stable coins, and there are kind of cryptocurrency as a try to be more stable than existing things like Bitcoin and Ether, but that just is, to me, the kind of the main challenge. Do you think, oh, that's, do you think that's a characteristic of just just being the

early days in such a young concept? The 10 years is nothing in the history of money. Yeah, and I think it's a combination of two things, right? One is it's still early days, but the other is a kind of more durable and a kind of economic problem, which is that they can demand for currency as volatile, right? Because of like recessions,

booms, changes to technology, lots of things, and if people's demand for how much currency they want to hold changes. And if you have a currency that has a fixed supply, then the change in demand has to be entirely expressed as a change in value over the currency. And so what that means is that kind of the volatility of demand becomes entirely translated into volatility in the head of prices of things that are

omitted in that currency. But if you have a currency where, instead, the supply can change, and so the supply can kind of go up when there's more demand, then you have the supply and absorbing more of that volatility. And so the price of the currency, what absorb lots of the volatility. On that topic, so Bitcoin does have a limited supply, a specific fixed supply. Yes. What's the idea in the Ethereum doesn't, but can you clarify?

Mm-hmm. I just in the comments, you just made, is Ethereum qualify to the kind of currency that you're talking about and being flexible in the supply? I mean, it's a bit more flexible, but kind of the thing that you would really want is something that's kind of specifically flexible in response to how valuable the currency is. And I'd recommend you look at stable coins as well, so things like die, for example. And so, like, can I just call that? D-A-I.

And what's stable coins? Is there a type of cryptocurrency? It is a type of cryptocurrency. It's a type of cryptocurrency that's issued by a smart contract, one of these Ethereum computer programs, that where the smart contract holds a bunch of ether and then it is basically,

like that people deposit and then it issues die and the reason why people deposit is because they want to kind of go high leverage on the ether. And so it kind of pairs these two sets of users one that wants stability and one that kind of wants extra risk together with each other. And it basically creates some or gives one set of participants a guarantee that they'll be, that they have this asset that can, that can be a later converted back into ether, but an expecifically outcome of the $1 rate. It has some kind of stabilizing network effects.

Yeah, it has this, yeah, it has many kinds of stabilizing mechanisms in it. That's fascinating. Okay. This, this That's fascinating. Okay. This world is awesome, technically, just from a scientific perspective, it's an awesome world. I often don't see from an outsider's perspective, what I often see is kind of maybe hype and a little bit, if I may say so, like, shaltanism. And you don't often see, at least from my outsider's perspective, the beautiful science of it and the engineering of it.

Maybe is there a comment you can make of who to follow, how to learn about this world without being interrupted by the charlatans and the hype people in this space. I think you do need to just know the specific kind of people to follow. There's all the kind of the cryptographers and the researchers. And there's just even just the Ethereum research crew, like myself, and like Danny Grad Danny, Justin, and other people. And then, and if the academic cryptographers, and I came, you know, before this today was at Stanford, and Stanford has the Center for watching research and of Dan Bonet, this is a really famous and great cryptographer as running it.

And there's a lot of other people there. And there's people working on zero knowledge proofs, for example, and Zuko from ZCash has a hit of one other person that I get respect. So if you follow the technical, just crawl along that. Yeah, yeah, you just start with a theory and group and then look at the economics, day, day, and so on.

And then just cautiously expand the network of people you follow. Yeah, exactly. And like if someone seems to self-promotion, all then just like, remove them. Is there books that are, there's these white papers. And we just discussed about ideas being condensed into really small parts. Is there books that are emerging that are kind of

good, introductory material for historical ones? And there's like Nathaniel Popper's digital gold, which is just about the history of Bitcoin. There's one and then Matthew Lysingen now and that there's one about the history of Ethereum for technical ones. And there's Andrea Sensenop opulosis mastery, ethereum. Great, so let me ask you sort of,

sorry, to pull back to the idea of governments and decentralized currency. You know, there's a tension between decentralization of currency and the power of nations, the power of governments, you, what's your sense about that tension? Can, is there some rule for regulation of currency? You, yeah, is there, like,

is the government the enemy of digital currency, of distributed currency, or can they be be like cautious friends? I mean, I think like one thing that people forget is that it's clearly not entirely an enemy because I think if there hadn't been so much government regulation on the kind of centralized digital, like issuing centralized digital currency is done. Like we'd be seeing things like people like Google and Facebook and Twitter are just kind

of issuing them left and right. And then like if that was the case, then decentralized currencies would still appeal to some people, but they definitely would appeal to less people than today. So even in that sense, I think it's, been more of a help, I've just been set the stage for the existence of the sector in some ways. But also, I think some of both, there's definitely things that governments can do in some cases have done to hurt the spread of growth of blockchains. There's things that they've done to help.

In some cases definitely done a good job of going after fraudulent projects and going after some of the projects that have some of the kind of craziest and most misleading marketing. There's also the possibility that governments will end up using blockchain, suffer a lot of different things. The government's, they do a lot more than just regulating, right? But there is also the, they have the identity records and they have property registry is even their own currency is like secure lots of different kind of things that they're operating and there's even blockchain applications and a lot of those. Yeah and they can leverage technology to do a lot of good for our societies. It is a little unfortunate that governments often lag behind in terms of their acceptance and leverage of

technology. If you look at the autonomous vehicle space AI in general, there are a few years behind. It'd be nice to help them catch up. That's always ongoing problem. You met Vladimir Putin to discuss the centralized currency here. You're born in the where we born column. It's a city about 115 kilometers south of Moscow in Russia. Yes. Yeah, I grew up in Moscow. I mean, that's Vladimir Putin is a central figure in this part of the world. So what was that like meeting him? What was that experience like? He's taller in photos than in person. Yeah, he's. Yeah, that's right. He's five, seven,

I think, five, eight, maybe. Yeah, unfortunately, we didn't actually kind of have too much of a chance to talk to him, like I meant, just to see him for about one minute at the end of this meeting. And I did get a chance to see a lot of some of the other end of government ministers and you recommended some. And some of them are actually, and if interested in trying to use blockchains to for various government use cases, they're gonna have a little bit corruption and other things. And I have, it's hard to tell from one conversation kind of what things are genuine and what things are just

like, oh, blockchain is cool, let's do blockchain. Right. But when I listen to like Barack Obama talk about artificial intelligence, there's certain things they hear where, okay, so he might not be an expert in AI, but he actually studied it carefully enough to think about it. Even if he's just reading a Wikipedia page, like he really thought about what this technology means. Did you get a sense that Putin or some of the ministers like thought about blockchain,

like thought about the fundamentals of the technology, or like understand it intuitively? Or are they too old school to try to grasp it? Summer old school, summer more new school. It depends, it's definitely, like depends on who you talk to. I mean, that's an open question for me with Putin because Putin has said that. I don't know, I've never only talked to him

for about one minute, so. But sometimes you can pick up sort of insights. As a quick comment, they're about, maybe you can correct me on this, but there are about 3000 cryptocurrencies being actively traded. Yes. And Ethereum is one of, you know, a lot of people believe that there will be the main crypto cars. I think Bitcoin is currently still the main crypto concept, but Ethereum very likely might become that the main one. Is this kind of diversity good in the crypto world? Do you see it sticking around?

Should there, should there be a winner? Like, should there be some consensus globally around Bitcoin or around Ethereum? Like, what's your, what's your sense? I definitely think the diversity is good. And I definitely think also that there's probably too many people trying to make separate blockchains, and of right now. I mean, the numbers should definitely be greater than one and probably greater than two or even five. Not three thousand. Not three thousand. Yeah. And also not even like 40 high quality platforms that try to do the same thing.

And there's definitely this range from just like one person who just like wrongly thinks that you can create a cryptocurrency in like 12 hours and I doesn't even think about kind of the community aspects of maintaining it going to people actually trying but only creating a really tiny one to like scammers to people like making something that's actually successful. And then there's a lot of different categories of blockchain and project in terms of what it's trying to do and what applications it's for. And I think the experimentation is definitely healthy.

If you look at the two worlds, it might be a little bit disjoints, but the distributed applications, cryptocurrency, and then the world of artificial intelligence, do you see there's some overlap between these worlds that both worry about centralized control? Is there some overlap that's interesting that you think about, do you think about AI much? Yeah, I think definitely had a thought about things

like the AI and if control problems and I'll align the problems and all of those things. You worry about the existential threat of AI? It's definitely one of the things I worry about. They think, come, block, there's a lot of kind of common challenges because in both cases, what you're ultimately trying to do is you're trying to, and if, get a simple system to direct a more complex system, like in the case of, uh, there's a strong AI is the idea would be that the simple system is people and the complex system is, or whatever thing, uh, the people, uh, the people end up, and eventually she's going to the universe

that will hopefully be a great thing. Um, and And in the case of blockchains and of the complex, well, the simple thing is the algorithm, which is a piece of static and fully open source code. And the more complex thing is just the them all of the different possible and if human actors and of the strategy is that they yeah, might end up used to participate in the network. Do you think about your mortality? Like what you hoped to accomplish in your life in the context? Oh, I definitely think about ending my own mortality. So, that's, if I gave you the option to live forever, would you? It depends a lot on what the fine bridge is.

I mean, you know, if it's one of those things where I'm going to be kind of like floating through up to space for 10 to the 75 years, then no. If it's forever worth of, and of having, you know, of fulfilling life with, and of meaning like, with, with friends to, to spend the time with, with kind of meaningful challenges to explore and an interesting things to be working on, then I think that's absolutely. That's beautifully put. Live forever, but you'd have to check the fine print. I think there's no better way to end it, Vatalik. Thank you so much for talking to us. It's so exciting to follow your work on my distance.

And thank you for creating a revolutionary idea and sticking with it and building it out and doing some incredible engineering work. And thanks for talking today. Yeah, thank you. Thanks for listening to this conversation with Vatalik Buterin. And thank you to our sponsors, ExpressVPN and Masterclass.

Please consider supporting the podcast by sending up to Masterclass at Masterclass.com slash Lex and getting ExpressVPN at ExpressVPN.com slash Lex pod. If you enjoy this podcast, subscribe on YouTube, review it with five stars and Apple podcasts, support it on Patreon or simply connect with me on Twitter, at Lex Friedman. And now, let me leave you with some words from Vitalik Buterin. The thing that I often ask startups on top of Ethereum is, can you please tell me why using Ethereum blockchain is better than using Excel? And if they can come up with a good answer, that's when you know you got something really interesting.

Thank you for listening and hope to see you next time. Thank you.